State governments confident taxpayers will bail them out

Front page of today’s USA Today, an article that really made my stomach churn. Seems most states are responding to the recession and falling revenues by, yes, continuing to spend at higher levels. Ya see, sugar daddy Congress is gonna take care of em. . . .

[M]any states continue to spend money at boom-time rates even though revenue is sinking. The mismatch between spending and revenue has left states facing projected shortfalls of up to $80 billion over the next six months, equal to as much as 10% of what states had planned to spend. . . . States are lobbying hard for federal aid to be sent as cash that can be used to reduce shortfalls rather than as money earmarked for new projects such as roads, bridges and other infrastructure. Scheppach and others want Congress to pay more of the cost of Medicaid, the health care program for the poor.

But wait, it gets worse. Some states are “taking steps” and look at this companion article from USA Today for a list of some of the sorriest, no, stupidest, budget management ideas to come down the turnpike. Just a couple of reactions. –you can’t solve overall personnel costs by having existing staff work less. You have to reduce the number of state workers and/or deal with the outrageous pension and health care obligations to state employees. (See here for a bone chilling examination of how this is the source of the next financial catastrophe, and here for what we said in 2005 about the problem and how to fix it.) –across the board spending cuts are ridiculous. They mean either a) all state spending is equally important, which is ludicrous, of b) we, your political leaders, are too lazy or too cowardly to do the hard work of figuring out what is more important and prioritizing spending. –borrowing to meet ongoing expenses is bad financial management and is a symptom of the same lack of willingness to prioritize. Kudos to SC Gov. Mark Sanford for opposing a federal bailout of the states. “If Washington will wave a magic wand and bail you out, the obvious answer in politics is to avoid decisions you don’t want to make,” says Sanford.